Larry Shapiro at IEEFA has an excellent new post on the secretive cartels that control who can connect to the US electrical grid, how much we pay for our electricity, and who gets energy and who doesn’t. Readers of The Power Line know how I feel about PJM Interconnection.
Here’s what Mr. Shapiro says:
A fact little known to most Americans is that the grid they rely on for electricity is controlled by quasi-public organizations whose lavishly paid executives and board members conduct business in deep secret.
Independent system operators, or ISOs, work almost entirely behind closed doors, even though their every action affects public electricity customers of all stripes—residential, business and public sector.
I call them quasi-public because so much of what they do so profoundly affects the utility-consuming public, even as their corporate structure and inner workings are shrouded in mystery. ISOs in effect are public agencies exempt from public scrutiny—and, as a sadly predictable result, quasi-public corporations gone wild.
A little background: ISOs run the electric grid region by region across the United States. Some cross state lines. Those include PJM (whose initials are derived from its footprint: Pennsylvania-New Jersey-Maryland) and MISO (Midcontinent Independent System Operator: 11 Midwestern states and part of Canada). Others, such as NYISO, the New York Independent System Operator, are confined to one state.
The Federal Energy Regulatory Commission (FERC) mandates that each ISO ensures that enough electricity is generated across the grid to avoid blackouts. FERC also charges each ISO with making sure electricity is fed into the grid at competitive prices and that the appropriate power-generation mix is in place.
Who knows, though, if any of this is happening?
Who knows, indeed.
Before Enron-backed laws were passed by the US Congress deregulating the US electrical system, all power companies were confined to operate within single states. State regulators had direct access to all of the vertically integrated power companies they regulated. Because these companies were monopolies and had no competitors, there was no reason for hiding this information from the public.
Now, claiming confidentiality of competitive secrets, power companies and RTOs/ISOs hide all their internal documents from public scrutiny. Also, because all power company business is done in fragmented “markets” ISOs have grown huge bureaucracies of lawyers, engineers and paper shufflers to oversee the complex mess.
And as Mr. Shapiro points out, these bureaucrats don’t come cheap:
NYISO’s tax filings—which by law are public because the organization positions itself as a tax-exempt nonprofit—hint at just how well the people who control ISOs are compensated. According to the NYISO’s 2013 tax return, Stephen G. Whitley, its president and CEO, was paid $1,804,749 that year. I’m not saying Whitley didn’t deserve that much. His is specialized work and his average workweek was said to be 60 hours. It’s still a lot of money. The members of the NYISO’s part-time board of directors also did okay. For working a reported 12 to 16 hours per week, they took home from $55,167 to $156,500 in 2013. Nice work if you can get it.
Add to these very good personal payouts the fact that board members choose their board cronies—without public review—whenever there’s an opening, and you have a system that ensures perpetuation.
All these salaries are passed on to rate payers.